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The economist Alex Tabarrok has argued, that the success of this promotion lies in the fact that consumers value the first unit significantly more than the second one. So compared to a seemingly equivalent "Half price off" promotion, they may only buy one item at half price, because the value they attach to the second unit is lower than even the discounted price.
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"Weekly Grocery Shop": The Chatterlys go grocery shopping. Kiff decides to go to the free sample station, Beryl tries to collect 20 coupons to play a crane game, and Martin tries to remember which groceries to buy after he forgets the shopping list. Kiff's delight is spoiled when the new sample station worker, Gordon, only allows paying ...
[2] [6] The "discount rate" is the rate at which the "discount" must grow as the delay in payment is extended. [7] This fact is directly tied into the time value of money and its calculations. [1] The present value of $1,000, 100 years into the future. Curves representing constant discount rates of 2%, 3%, 5%, and 7%
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